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Rebound Slows for Durable Goods

RFP
Durable goods orders rose 7.3% in June from the month prior, after jumping 15.1% in May. Durable goods orders remain 13.3% below the weak, year-ago levels when the trade war with China sapped business investment.

Orders excluding the volatile transportation component rose a more moderate 3.3%. Orders at vehicle plants jumped a whopping 85.7% in June but remained more than 25% below year-ago levels. The report illustrates continued caution, showing that many plants were still idled entirely or operating at a fraction of previous capacity due to COVID-19. Orders for new aircraft retreated as a drop in defense orders exacerbated a stunning, 462% loss in commercial aircraft orders.

Core capital goods orders, which strip out volatile aircraft and defense orders and reflect business plans for the immediate future, rose only 3.3% in June but remained 2.3% below weak, year-ago levels.

Outside of orders for vehicle plants, we saw related gains in primary metals, fabricated projects and machinery. Computers and related products, which include cell phones, showed weakness

Core shipments, which feed directly into businesses investment components of the GDP data for the second quarter, rose 3.4% in June but remained 3% below year-ago levels. The strongest gains were in motor vehicle shipments and related primary and fabricated metals. Shipments of computers and related production fell sharply.

Overall shipments suggest another contraction in business investment for the second quarter. That will mark the fifth consecutive quarterly contraction for business investment.

Bottom Line
We still have a long way to go to regain what has been lost to COVID-19. Some plants will be permanently idled. Others need a stronger rebound in both domestic and foreign demand to restart. Other developed countries are doing better than the U.S. in managing the virus spread and helping their economies recover.

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Karen.Nye@us.gt.com

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